Debt Consolidation vs. Consumer Proposal: Which One Is Better?

If you’re struggling with credit card bills, loan payments, or collection calls, you’re not alone. Many people in Manitoba are facing similar challenges—and two of the most common debt solutions are debt consolidation and consumer proposals. But which one is right for you?

Here’s a side-by-side breakdown to help you decide:

1. What Is Debt Consolidation?

Debt consolidation involves taking out a new loan to pay off multiple existing debts. You combine your debts into one monthly payment, ideally at a lower interest rate. This works best if you have good credit and consistent income.

2. What Is a Consumer Proposal?

A consumer proposal is a legal agreement filed through a Licensed Insolvency Trustee (LIT). You could repay only a portion of what you owe, with no interest, over a fixed period—up to 5 years. It’s legally binding and offers creditor protection.

3. Key Differences at a Glance:

Feature	Debt Consolidation	Consumer Proposal
Type	New loan	Legal debt settlement
Credit Requirement	Good to excellent	No credit check required
Monthly Payment	Enough to pay full debt + interest over term	Reduced debt, no interest
Asset Risk	None if unsecured	None – assets usually protected
Legal Protection from Creditors	No	Yes – full creditor protection

4. When Debt Consolidation Works Best:

• You have a stable job and good credit
• You can qualify for a low-interest loan
• You want to simplify payments and reduce interest, not reduce debt

5. When a Consumer Proposal Is the Better Fit:

• You can’t keep up with minimum payments
• You’ve been denied a consolidation loan
• You need legal protection from creditors and wage garnishments

Manitoba Example:

A Winnipeg couple with $40,000 in high-interest credit card debt was denied a consolidation loan due to low credit scores. With help from Lazer Grant, they filed a consumer proposal, reduced their monthly payments by 60%, and avoided bankruptcy.

Final Thoughts:

There’s no one-size-fits-all solution. If you’re unsure which route is right for you, speak to a Licensed Insolvency Trustee. At Lazer Grant in Winnipeg, we help Manitoba residents compare all their options and build personalized plans for real debt relief.

📞 Book your free consultation today and let’s explore what works best for your situation.